Can I Gift Out My IRA Account if I Am Retired?

by Jack Ori

An individual retirement account (IRA), is a deferred taxation account. You don't pay taxes on the money you put into the IRA until you withdraw it, usually after retirement. You can't take money out of the IRA without incurring tax penalties unless you are over the age of 59 1/2. However, once you retire you can take money out and give it to relatives as well as use it for yourself without paying tax penalties.

Traditional IRA

You must take out a distribution from your IRA if you want to gift it to a family member. You can't just transfer the money from your IRA to the family member's bank account; you have to make the withdrawal and give it to the family member. If you are retired, you shouldn't face tax penalties for doing this. However, if you are under the age of 59 1/2, you'll pay a 10 percent tax penalty when you take out the distribution.

Gift Taxes

As of the time of publication, you can give gifts of up to $13,000 per person without incurring gift taxes. Thus, you can take distributions from your traditional IRA of up to $13,000 to give to family members. If you take out more than $13,000, you must pay gift tax on the excess. For example, if you take out $14,000, you have to pay gift taxes on $1,000. You must report all distributions as income when you pay your taxes the following year.

Charitable Contributions

The Internal Revenue Service (IRS) does not tax IRA funds if you use them to make gifts to charity. Some people bequeath their IRA funds to the charity of their choice to avoid hefty estate taxes on their IRA funds after their death. If you want to give an inheritance to your heirs out of your IRA funds, you can set up a charitable remainder trust, which then distributes the funds left over after your charitable contribution to your heirs after your death.


You can't transfer money directly to another person from your IRA. However, you can transfer money directly from your IRA to the charity of your choice if you would rather make your contribution while you are still alive. If you transfer money directly from your IRA account to the charity's account, you don't have to pay taxes on the charitable contribution, as you would if you took a distribution first and then gave it to charity.

Photo Credits

  • Ryan McVay/Lifesize/Getty Images